BC Card CEO Chang Hyung-duk

By Kim Tong-hyung
Staff Reporter

Various credit card companies are showing interest in getting a slice of the mobile-phone service market, apparently inspired by the rise of the mobile wallet.

The collaboration of Hana Financial Group and SK Telecom, the country's top wireless carrier, on a yet-to-be-launched credit card company has been one of the most interesting storylines in the business sector.

Now, BC Card, Hana's credit card rival, is seeking a more direct entry into the telecommunications business, planning to offer its own mobile-phone services as a mobile virtual network operator (MVNO). MVNOs buy traffic, or wholesale minutes, texts and data from network operators such as SK Telecom and KT, and resell it to their customers under their own mobile service brand.

Shinhan Card, the country's biggest credit card company, is also considering providing mobile-phone services as an MVNO, industry sources said. The company is currently engaged in joint marketing activities with KT, the country's biggest telephone company and No. 2 wireless provider.

The Korea Communications Commission (KCC), South Korea's converged regulator for broadcasting and telecommunications, has been seeking to revise the country's Communications Business Law to legitimize MVNOs in an effort to renew competition in the saturated wireless market.

KCC's draft bill currently awaits discussion in the National Assembly, and could gain approval by lawmakers as early as by the end of this month.

"Nothing is concrete at this point. Mobile-phone services are just one of the many potential business plans we are now discussing," a BC Card official said.

Although company officials declined to confirm, there have been rumors in the industry that BC Card has saved 200 billion won (about $164 million) to start the MVNO business and is seeking business partners to secure further investment.

BC Card has also contacted a former senior official of the Ministry of Information and Communication, the predecessor of the KCC, and a number of other telecommunications experts as it searches for personnel to lead the potential mobile-phone business.

Credit card companies are not the only outsiders looking for a piece of the pie of the mobile telephony market. Cable television companies, which continue to see blurring business boundaries between them and telecommunications providers, and major retailers, who may benefit from their nationwide networks and also their existing radio frequency identification (RFID) equipment, are considering the MVNO as potential business models.

The KCC, increasingly pressured by Cheong Wa Dae to find ways to lower household telecommunications expenses, hopes that the introduction of MVNOs will trigger price competition and eventually force the existing carriers to lower their voice rates.

However, it remains to be seen whether MVNOs could be different here, as the track record for such non-traditional wireless operators have been mixed in other countries.

The most lavish MVNO efforts in the United States, pursued by media companies such as ESPN and Disney, and also Helio, a joint venture between Atlanta-based Earthlink and SK Telecom, have failed miserably in the past few years. However, a number of less ambitious MVNOs, which focused on low costs and specific business models, have managed to do better.

Obviously, convincing consumers to buy mobile-phone services from a non-telecommunications company must be a difficult challenge, and industry watchers believe that the success of future MVNOs will depend on their ability to deliver something distinctive.

Credit card companies could obviously benefit from the increasing number of mobile subscribers using their microchip-embedded handsets for electronic payment and banking.

Operating their own mobile-phone services will allow the credit card companies to hog electronic payment revenue without paying commissions to mobile-phone operators.

Retailers could take advantage of their RFID systems and allow their mobile-phone customers to buy products by pressing their handsets against the electronic tags attached to products.

"MVNOs won't have a prayer of prying away subscribers from existing wireless carriers in the traditional way. However, there are a lot of possibilities, such as developing new mobile financial services on new handsets and also introducing data services that take advantage of their strengths in their traditional business sectors," said an official from KCC's telecommunications policy bureau.

thkim@koreatimes.co.kr